Shares in Hong Kong and mainland China rose on Tuesday after the Chinese government moved to lift the economy with a series of new measures amid the trade tensions with the United States and a scandal in the pharmaceutical sector.

The State Council, the state cabinet, said on Monday it would adopt a “more proactive fiscal policy” and would speed up raising and spending 1.35 trillion yuan (about US$199 billion) for local government, designated to be spent on infrastructure.

Beijing also injected 500 billion yuan (US$73.57 billion) into the banking system as it sought to aid a recovering yuan and the scandal-hit pharmaceutical sector.

“A-share investors believe the government is going to use infrastructure investment to boost the economy, and counter the negative impact of the trade war with the US,” said Francis Lun, chief executive of Geo Securities.

The benchmark Shanghai Composite Index rose by 1.6 per cent, or 46.02 points, to 2,905.56, while the CSI 300 Index gained by 1.59 per cent, or 55.96 points, to 3,581.71. The ChiNext gauge of smaller companies finished 0.53 per cent, or 8.64 points, higher at 1,629.61.

He said a 400-point boom in mainland markets on Tuesday was led by infrastructure companies. “The central bank injected 500 billion yuan into the banking system, and issued directives that the banks should buy A minus corporate bonds to help the liquidity of these second-line companies,” said Lun.

China Railway rose by 10.5 per cent to HK$6.74 and China Rail Construction jumped by 13.7 per cent to HK$9.4. Anhui Conch Cement gained 8.2 per cent to HK$49 and China Communications Construction jumped by 11.9 per cent to HK$8.4.

In Hong Kong, the Hang Seng Index rose by 1.44 per cent, or 406.45 points, to 28,662.57, and the Hang Seng China Enterprises Index, or the H-share gauge, rose by 2.26 per cent, or 242.56 points, to 10,973.92.

Banks were top performers, recording a turnover of HK$15.58 billion, continuing Monday’s rising trend, after a stabilised yuan and long-awaited guidelines on commercial banks’ wealth-management products provided strength to the stock market.

The Industrial and Commercial Bank of China rose by 3.38 per cent to finish at HK$5.8, while China Construction Bank was up by 3.2 per cent to HK$7.1. The Bank of China (Hong Kong) rose by 2.3 per cent to HK$37.6 and HSBC Holdings added 1.7 per cent to HK$74.65.

Mainland developers rebounded after falling over the past two weeks. The Evergrande Group was up by 4.12 per cent to HK$21.5, Country Garden gained 3.5 per cent to HK$13 and China Overseas Land and Investment rose by 3.36 per cent to HK$24.6.

Pharmaceuticals took a back seat, with minor gains and losses, after these stocks were hit hard on Monday following a scandal surrounding Changsheng Bio-technology, a Shenzhen-listed company that was found to have fabricated the production and inspection of its rabies vaccines.

“They have a cloud hanging over them – nobody has any faith in Chinese pharmaceuticals,” said Geo Securities’ Lun.

The Health Care Index, which tracks the performance of 22 pharmaceutical stocks on China’s blue-chip CSI 300 Index, etched up 0.9 per cent to 1.9 yuan, after ending the previous session down by 4.1 per cent.